U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-QSB

(Mark One)

         [X]      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
         SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended:  September 30, 1999

                                                        or

         [  ]     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
         SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____________________ to ____________________

Commission File Number:  0-27077

                            TREMONT ADVISERS, INC.
          (Exact name of small business issuer as specified in its charter)
   Delaware
(State or other jurisdiction                     06-1210532
 or incorporation or organization)   (I.R.S. Employer Identification No)

                       555 Theodore Fremd Avenue, Rye, New York 10580
                   (Address of principal executive offices) (Zip Code)

                              (914) 925-1140
                         (Issuer's telephone number)


        (Former name, former address and former fiscal year,
              if changed since last report)

         Check whether the issuer (1) filed all reports  required to be filed by
Section 13 or 15(d) of the  Exchange  Act during the past 12 months (or for such
shorter  period) that the issuer was required to file such reports,  and (2) has
been subject to such filing requirements for the past 90 days.
         Yes   X                    No

       APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDING DURING THE
                                PRECEDING FIVE YEARS

         Check whether the issuer filed all documents and reports required to be
filed by Section 12, 13, or 15(d) of the Exchange Act after the  distribution of
securities under a plan confirmed by a court.
         Yes                        No

                                       APPLICABLE ONLY TO CORPORATE ISSUERS:



The number of shares outstanding of the Registrant's Class A Common Stock, $0.01
par value,  as of the close of business on November 5, 1999 was  1,596,118,  and
the number of shares outstanding of the Registrant's Class B Common Stock, $0.01
par value,  as of the close of business on November 5, 1999, was 4,014,099 as of
the same date. Shares  outstanding have been restated to reflect the impact of a
five-for-four  stock split paid on August 16, 1999 to  shareholders of record on
July 30, 1999.

<PAGE>


                                                       INDEX

                                              Tremont Advisers, Inc.

PART I - FINANCIAL INFORMATION

<TABLE>
<S>                                                                                                      <C>
Item 1.  Financial Statements. (Unaudited)                                                               Page

    Condensed Consolidated Balance Sheets - September 30, 1999 (unaudited)
       and December 31, 1998 (audited)                                                                      1

    Condensed Consolidated Statements of Income -
       nine and three months ended September 30, 1999 and 1998                                              2

    Condensed Consolidated Statement of Shareholders' Equity -
       nine months ended September 30, 1999                                                                 3

    Condensed Consolidated Statements of Cash Flows -
       nine months ended September 30, 1999 and 1998                                                        4

    Notes to Condensed Consolidated Financial Statements                                                    6


Item 2.  Management's Discussion and Analysis                                                              15



PART II - OTHER INFORMATION

Item 1.  Legal Proceedings                                                                                 21

Item 6.  Exhibits and Reports on Form 8-K                                                                  21

Signature                                                                                                  21

Exhibit 27 - Financial Data Schedule                                                                       22


</TABLE>

<PAGE>

<TABLE>
<S>                                                                   <C>                        <C>
                                             PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements

                                                  Tremont Advisers, Inc.
                                         Condensed Consolidated Balance Sheets

                                                                               September 30, 1999  December 31, 1998
                                                                                (Unaudited)         (Audited)
                                                                      ----------------------------------------
Assets
Current Assets
  Cash and cash equivalents                                                          $ 2,763,400    $ 1,893,800
  Accounts receivable, net                                                             2,942,900      2,111,600
  Income taxes receivable                                                                      -         82,800
  Prepaid expenses and other assets                                                      212,900        327,900
                                                                      ----------------------------------------
Total current assets                                                                   5,919,200      4,416,100

Investments in limited partnerships (cost $2,346,600 and $1,428,600)                   3,280,300      2,034,700
Other investments (cost $1,408,900 and $469,900)                                       1,099,100        200,300
Fixed assets, net                                                                        752,600        449,700
Goodwill, net                                                                          2,054,300              -
Other assets                                                                              30,200        192,900
                                                                      ----------------------------------------
Total assets                                                                        $ 13,135,700    $ 7,293,700
                                                                      ========================================

Liabilities and shareholders' equity
Current liabilities
  Accounts payable                                                                     $ 271,400      $ 283,300
  Accrued expenses                                                                     2,015,000      1,111,200
  Income taxes payable                                                                    57,000              -
  Deferred income taxes payable                                                           32,600         29,000
  Deferred revenue                                                                       760,100              -
                                                                      ----------------------------------------
Total current liabilities                                                              3,136,100      1,423,500

Deferred income taxes payable                                                            920,900        559,400

Shareholders' equity
  Preferred Stock $1 par value, 350,000 shares
  authorized, issued and outstanding - none                                                    -              -
  Class A Common Stock, $0.01 par value, 5,000,000 shares
  authorized, 1,596,118 and 1,605,897 shares issued and outstanding                       16,000         12,800
  Class B Common Stock, $0.01 par value, 10,000,000 shares
  authorized, 4,014,099 and 3,674,505 shares issued and outstanding                       40,100         29,400
Additional paid in capital                                                             6,999,300      5,106,900
Retained earnings                                                                      2,005,700        167,000
Cumulative foreign currency translation adjustment                                        17,600         (5,300)
                                                                      ----------------------------------------
Total shareholders' equity                                                             9,078,700      5,310,800
                                                                      ----------------------------------------
Total liabilities and shareholders' equity                                          $ 13,135,700    $ 7,293,700
                                                                      ========================================

See accompanying notes.

Note:  The Condensed Consolidated Balance Sheet at December 31, 1998 has been derived from the audited
           financial statements as of that date.

</TABLE>
                                        1
<PAGE>


<TABLE>
<S>                                               <C>              <C>               <C>            <C>
                                                  Tremont Advisers, Inc.
                                    Condensed Consolidated Statements of Income
                                                      (Unaudited)


                                                            Nine months ended            Three months ended

                                                              September 30                  September 30
                                                         1999             1998            1999            1998
                                                     -----------------------------------------------------------

Revenues
Consulting fees                                        $ 10,940,500  $  6,982,900      $ 3,942,800    $ 2,646,800
Performance fees                                            190,800       324,400           60,000          7,800
Commissions                                                 296,400       316,200           49,300         98,000
                                                     -----------------------------------------------------------
Total revenues                                           11,427,700     7,623,500        4,052,100      2,752,600

Expenses
Compensation                                              4,576,500     2,784,100        1,830,800        990,800
General and administrative                                2,746,000     1,895,100        1,039,200        739,500
Consulting                                                1,160,800       993,800          374,900        332,800
Depreciation                                                191,800       133,600           77,700         51,100
Amortization of intangibles                                 609,800             -          202,600              -
                                                     -----------------------------------------------------------
Total expenses                                            9,284,900     5,806,600        3,525,200      2,114,200



Equity (loss) in earnings of limited partnerships           327,600       111,600          102,000        (39,900)
Equity (loss) in earnings of other investments              361,900      (201,600)         365,000        (66,400)
Other income, net                                            50,700        46,500           27,200         30,800
                                                     -----------------------------------------------------------

Income before income taxes                                2,883,000     1,773,400        1,021,100        562,900
Provision for income taxes                                1,044,300       655,600          388,900        246,400
                                                     -----------------------------------------------------------
Net income                                             $  1,838,700  $  1,117,800     $    632,200   $    316,500
                                                     ===========================================================

Net income per common share                                   $0.33         $0.22          $  0.11  $        0.06
                                                     ===========================================================

Net income per common share - assuming dilution               $0.31         $0.21          $  0.11  $        0.06
                                                     ===========================================================

</TABLE>

                                   2

<PAGE>

<TABLE>
<S>                                        <C>          <C>           <C>         <C>          <C>


                                                     Tremont Advisers, Inc.
                                        Consolidated Statement of Shareholders' Equity
                                             Nine months ended September 30, 1999
                                                        (Unaudited)

                                            Common Stock               Additional                   Total
                                             Par Value                   Paid In     Retained    Shareholders'
                                              Class A      Class B       Capital     Earnings      Equity
                                           ------------------------------------------------------------------

Balance at
  December 31, 1998                          $   12,800    $   29,400    $5,106,900  $ 167,000    $5,310,800

Comprehensive Income:

Net Income                                           -             -             -   1,838,700     1,838,700

Foreign currency translation
  adjustment                                         -             -             -          -         22,900
                                           ------------------------------------------------------------------

Comprehensive Income                                                                               1,861,600

Issuance of Class B
  Common Stock - MGL
  purchase (47,619 shares)                           -            500       356,700          -       357,200

Issuance of Class B
  Common Stock - TASS
  Acquisition (190,477 shares)                       -          1,900     1,426,700          -     1,428,600

Issuance of Class B
  Common Stock - exercise
  of Director Options (21,250 shares)                -            200        74,800          -        75,000

Issuance of Class B
  Common Stock - exercise
  of Employee Options (5,000 shares)                 -             -         18,750          -        18,750

Income tax benefits
  Related to exercise of
  Stock Options                                      -             -         27,350          -        27,350

Conversion of Class A Common Stock
  to Class B Common Stock (7,802 shares)             -             -             -           -            -

5 for 4 Stock Split                                 3,200       8,100       (11,300)         -            -
     (319,202 Class A Shares)
     (801,349 Class B Shares)

Cash-in-lieu of fractional shares                    -             -           (600)         -          (600)

                                           ------------------------------------------------------------------
Balance at September 30, 1999                $   16,000    $   40,100    $6,999,300 $2,005,700    $9,078,700
                                           ==================================================================

</TABLE>

                                   3

<PAGE>

<TABLE>
<S>                                                          <C>                   <C>

                                             Tremont Advisers, Inc.
                                 Condensed Consolidated Statements of Cash Flows
                                                   (Unaudited)

                                                                          Nine months ended
                                                                             September 30
                                                                      1999             1998
                                                               ------------------------------------
Operating Activities
Net income                                                         $   1,838,700      $  1,117,800
Adjustments to reconcile net income
  to cash provided by operating activities:
  Depreciation                                                           191,800           133,600
  Amortization of intangibles                                            609,800                -
  Equity in earnings of limited partnerships                            (327,600)         (111,600)
  Loss from other investments                                             40,200           213,700
  Deferred income taxes payable                                          365,100           176,600
  Foreign currency translation adjustment                                 22,900            (5,300)
  Minority Interest                                                           -            (17,500)
Changes in operating assets and liabilities:
    Accounts receivable, net                                            (646,800)         (657,100)
    Receivable from officer                                                   -            200,000
    Accounts payable                                                     (51,100)            4,500
    Accrued expenses                                                      13,700           216,400
    Deferred revenue                                                     (33,500)                -
    Income taxes, net                                                    139,800          (102,600)
    Other assets                                                         162,700            (1,100)
    Prepaid expenses and other                                           234,800            19,600
                                                               ------------------------------------
Net cash provided  by operating activities                             2,560,500         1,187,000

Investing activities
Purchase of fixed assets                                                (413,600)         (103,100)
Investments in limited partnerships                                     (918,000)         (710,000)
Cash acquired from acquisition of TASS                                   102,000                -
Investments in other investments                                        (939,000)         (254,200)
                                                               ------------------------------------
Net cash used by investing activities                                 (2,168,600)       (1,067,300)

Financing activities
Proceeds from issuance of Class B Common Stock                           357,200                -
Exercise of Class B Common Stock options                                  93,750           238,100
Tax benefit from exercise of stock options                                27,350           126,100
Other                                                                       (600)           17,500
                                                               ------------------------------------
Net cash provided by financing activities                                477,700           381,700

Net increase in cash and cash equivalents                                869,600           501,400
Cash and cash equivalents at beginning of period                       1,893,800           820,800
                                                               ------------------------------------
Cash and cash equivalents at end of period                         $   2,763,400      $  1,322,200
                                                               ====================================

</TABLE>

                                        4

<PAGE>

<TABLE>
<S>                                                                <C>                   <C>

                                            Tremont Advisers, Inc.
                           Condensed Consolidated Statements of Cash Flows (con't)
                                                 (Unaudited)

Supplemental disclosures of cash flow information:

                                                                             Nine months ended

                                                                                 September 30
                                                                             1999            1998
                                                                      ---------------------------------
Financing activities
Noncash transaction related to the
      issuance of Class B Common Stock in
      the TASS acquisition                                            $   1,428,600       $         -

Investing activities
Liabilities assumed in the TASS acquisition
     Deferred revenue                                                       793,600                 -
     Accounts payable                                                        39,200                 -
     Accrued expenses                                                       411,500                 -
     Short -term debt                                                       236,800                 -

Assets acquired in the TASS acquisition                                                              -
     Fixed assets, net                                                       81,100                  -
     Accounts receivable                                                    184,500                  -
     Prepaid and other                                                       47,000                  -
     Customer contracts                                                     555,500                  -
     Goodwill                                                             2,181,400                  -

Accrued acquisition costs                                                   241,800                  -

Gain on receipt of stock of unconsolidated affiliate                       (402,100)                 -

Expense charge relating to distribution of stock of
 unconsolidated affiliate                                                   402,100                  -

See accompanying notes.

</TABLE>

                              5

<PAGE>

                             Tremont Advisers, Inc.

              Notes to Condensed Consolidated Financial Statements
                                   (Unaudited)


NOTE A - Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial  information and with the  instructions to Form 10-QSB and Item 310(b)
of Regulation S-B.  Accordingly,  they do not include all of the information and
footnotes  required by generally  accepted  accounting  principles  for complete
financial statements. In the opinion of management,  all adjustments (consisting
of  normal  recurring  accruals)  necessary  for a fair  presentation  have been
included.  Operating  results for the nine and three months ended  September 30,
1999 are not necessarily  indicative of the results that may be expected for the
year  ending  December  31,  1999.  For  further   information,   refer  to  the
consolidated   financial  statements  and  footnotes  thereto  included  in  the
Company's  Annual  Report on Form 10-KSB for the fiscal year ended  December 31,
1998.

The preparation of financial  statements in conformity  with generally  accepted
accounting principles requires management to make estimates and assumptions that
affect  the  reported  amounts  of assets  and  liabilities  and  disclosure  of
contingent  assets and  liabilities at the date of the financial  statements and
the reported amounts of revenue and expenses during the reporting period. Actual
results could differ from such estimates.

Principles of Consolidation - The condensed  consolidated  financial  statements
include the accounts of the Company and its majority owned subsidiaries.

Intangibles - Goodwill represents the excess of purchase price and related costs
over the value  assigned to the net tangible  assets of the  business  acquired.
Goodwill is amortized on a straight-line  basis over ten years. Other intangible
assets, including customer contracts,  which is included in prepaid expenses and
other assets, are amortized over their economic lives, generally one year.

Earnings per Share - Basic  earnings per share is computed based on the weighted
average number of common shares outstanding. Diluted earnings per share reflects
the increase in the weighted average common shares outstanding that would result
from the assumed  exercise of outstanding  stock options,  calculated  using the
treasury  stock  method.  All per  share and  share  outstanding  data have been
restated to reflect the impact of a five-for-four stock split (see Note G).

Minority  Interest  - The  Company  presently  owns  65% of  Tremont  Investment
Management, Inc. ("TIMI").

Concentrations  of  Credit  Risk - The  Company's  accounts  receivable  are not
concentrated  in any specific  geographic  region,  but are  concentrated in the
investment  industry.  The  Company's  exposure to credit risk  associated  with
nonpayment  by  customers  is  affected  by  conditions  within  the  investment
industry.

Income Taxes - The provisions  for income taxes include  federal and state taxes
currently  payable  after  reduction  for  undistributed   foreign  subsidiaries
considered  permanently  reinvested  and those  deferred  because  of  temporary
differences  between  the  financial  statement  and the tax basis of assets and
liabilities. A valuation allowance is recorded, based on available evidence when
it is more likely than not that some  portion or all of the  deferred tax assets
will not be realized.

                                        6

<PAGE>


NOTE  B - Investments in Limited Partnerships

At September 30, 1999 and December 31, 1998,  Tremont  Partners,  Inc.'s ("TPI")
investment  in American  Masters  Broad  Market  Fund,  L.P.,  was  $919,600 and
$807,200  representing  .35% and .43%,  respectively,  of the fund's net assets.
Summarized financial information of such fund is as follows:


<TABLE>
<S>                                    <C>                        <C>

                                          September 30, 1999        December 31, 1998
                                      -----------------------------------------------------
                                              (Unaudited)               (Audited)

Total assets                             $           262,635,000   $     198,415,000
Total liabilities                                        535,500          10,725,000

                                                         Nine months ended
                                                           September 30
                                                 1999                      1998
                                      -----------------------------------------------------
                                                                (Unaudited)

Net investment income                   $              3,452,800    $      2,414,600
Net realized and unrealized
  gain on investments                                 25,088,900          16,544,300
                                      -----------------------------------------------------
Net income                              $             28,541,700    $     18,958,900
                                      =====================================================


</TABLE>

At September 30, 1999,  investments  in Meridian  Horizon Fund,  L.P.,  GamTree,
L.P.,  American  Masters  Broad Market Prime Fund,  L.P.,  and American  Masters
Market  Neutral  Fund,  L.P.  were  $437,000,  $192,400,  $527,500 and $656,100,
respectively.  In addition,  TIMI  launched The Tremont  Masters Fund  effective
February 1, 1999 and invested  $500,000  therein.  At September 30, 1999, TIMI's
investment  in The Tremont  Masters  Fund was  $547,700.  At December  31, 1998,
investments in Meridian  Horizon Fund,  L.P.,  Gamtree,  L.P.,  American Masters
Broad Market Prime Fund,  L.P. and American  Masters Market  Neutral Fund,  L.P.
were  $378,600,  $177,600,  $56,700 and $614,600  respectively.  The  aggregated
summarized  unaudited  financial  information  of these entities and The Tremont
Masters Fund is as follows:

                                        7

<PAGE>

<TABLE>
<S>                                     <C>                        <C>



                                             September 30, 1999          December 31, 1998
                                        -----------------------     ----------------------------
                                              (Unaudited)                    (Audited)

Total assets                                 $     633,347,300         $            483,231,000
Total liabilities                                  145,708,700                       86,305,000

                                                             Nine months ended
                                                                September
                                                 1999                           1998
                                        --------------------------------------------------------
                                                            (Unaudited)

Net investment loss                        $       (3,345,800)        $              (3,046,300)
Net realized and unrealized
  gain on investments                              66,423,500                        31,616,400
                                        -----------------------     ----------------------------
Net income                                  $      63,077,700         $              28,570,100
                                        =======================     ============================

</TABLE>

NOTE C - Other Investments

At  December  31,  1998,  TBL had a 40%  interest  (cost-$6,000)  in an offshore
non-public  venture that developed an independent  electronic  commerce vehicle,
HedgeWorld Ltd., to provide certain online services to the hedge fund community.
At December 31, 1998,  TBL's  investment was written down to zero to account for
its proportionate  share of operating losses. At June 30, 1999, TBL had advances
to this entity that aggregated  $117,000.  At December 31, 1998, TBL also had an
investment  of  $19,000  in  Fitx  Capital  Limited  (formerly  Tremont  Capital
Limited), a Bermuda corporation formed to provide various investment services to
offshore clients. During the third quarter of 1999, in a series of transactions,
TBL transferred  its interests in these  entities,  having an aggregate value of
$133,800,  to  Fitx  Group  Limited  ("Fitx"),  an  exempt  Bermuda  Company  in
consideration of 30% of its outstanding stock. Fitx was formed on June 23, 1999,
to deliver  e-commerce  portal  solutions to niche markets thereby  enabling the
exchange of  information  services and capital  needed  between money  managers,
service  providers and customers  primarily  within the hedge fund industry.  In
September  1999 TBL invested an  additional  $209,100 in Fitx.  The Company also
recognized a gain of $402,100 due to the  distribution of 120,500 shares of Fitx
Group  Limited stock to certain  employees  and directors of the Company.  After
recording an estimated  loss of $50,000,  TBL's  investment in Fitx was $292,900
(cost $342,900) at September 30, 1999.

American  Masters LDC (formerly called Tremont Broad Market Fund, LDC) ("AMLDC")
is a Cayman Island  limited  duration  corporation  organized for the purpose of
achieving  capital  growth through  hedged  investments.  At September 30, 1999,
TBL's investment in AMLDC was $617,900 (cost - $600,000).  TBL had no investment
in this entity at December 31, 1998.


                                        8

<PAGE>

NOTE D - Accrued Expenses

Accrued expenses consist of the following:

<TABLE>
<S>                                     <C>                           <C>
                                             September 30, 1999         December 31, 1998
                                         ------------------------------------------------------
                                                 (Unaudited)                (Audited)

Professional and consulting fees           $               783,900     $               579,300
Compensation                                               757,500                     300,000
Short-term notes payable                                   236,900                      39,800
Employee benefit plan                                       96,800                     110,000
Printing and graphics                                       29,700                      37,500
Other                                                      110,200                      44,600
                                         ------------------------------------------------------
                                           $             2,015,000     $             1,111,200
                                         ======================================================


</TABLE>

NOTE E - Stock Options

During the nine months  ended  September  30,  1999,  certain  directors  and an
executive officer exercised options to purchase an aggregate of 25,000 and 6,250
shares, respectively of the Company's Class B Common Stock at $3.00 per share. A
summary  of the  Company's  stock  option  activity  for the nine  months  ended
September 30, 1999 is as follows:

Outstanding-beginning of period:                                     378,207
Granted                                                              344,316
Exercised                                                            (31,250)
Lapsed                                                                (1,250)
                                                           ------------------
Outstanding-end of period                                            690,023
                                                           ==================

Exercisable at end of period                                         514,676
                                                           ==================


Nicola Meaden,  Chief  Executive  Officer of TASS  Investment  Research  Limited
("TASS"), was granted two types of options (the "Group I Options" and the "Group
II Options") to purchase  184,309 and 31,055  shares,  respectively,  of Class B
Common Stock. Additionally,  Laurence Huntington Taylor II, a principal of TASS,
was  granted  97,509  Group I Options and 16,443  Group II Options.  The Group I
Options and Group II Options are  exercisable  at $6.40 per share and $12.00 per
share,  respectively.  Sixty percent of the Group I Options  became  exercisable
effective March 11, 1999; the balance will become exercisable on March 11, 2000.
One-third  of the Group II Options  vested on March 11,  1999,  the balance vest
one-third  each on March  11,  2000 and 2001.  Both the Group I Options  and the
Group II Options become immediately  exercisable upon a change in control of the
Company.  These options may not be transferred without the prior written consent
of the Company.  In the event that either employee seeks to sell or transfer any
shares of the Company's stock other than to a family member, the Company has the
right of first  refusal to purchase the shares on the same terms and  conditions
as the third party offer.


                                             9

<PAGE>

During March 1999,  options to purchase 15,000 shares of Class B Common Stock at
$12.00 per share were granted to certain  other  employees of TASS.  The options
vest and became or will become exercisable on the following  schedule:  33.3% on
the date of the agreement,  33.3% on the first  anniversary of the agreement and
33.4% on the second anniversary of the agreement.


NOTE F - Income Taxes

The income tax provision gives effect to permanent differences between financial
and taxable income,  resulting in a higher effective tax rate than the statutory
income tax rate. The  reconciliation of income tax attributable to income before
income  taxes  computed at the U.S.  federal  statutory  tax rates to income tax
expense is:

<TABLE>
<S>                                               <C>               <C>              <C>            <C>

                                                                    Nine months ended
                                                                      September 30
                                                            1999                          1998
                                                 ------------------------------------------------------------
                                                      Amount         Percent        Amount         Percent
                                                 ------------------------------------------------------------

Statutory federal income tax rate                  $      980,200         34.0    $     603,000       34.0
State taxes, net of federal benefit                       114,300          4.0           82,700        4.7
Permanently reinvested foreign income                    (204,000)        (7.1)         (68,000)      (3.8)
Change in valuation allowance relating
 to losses of foreign subsidiaries                        215,500          7.5           14,800        0.8
Other                                                     (61,700)        (2.1)          23,100        1.3
                                                 ------------------------------------------------------------
                                                    $   1,044,300         36.3    $     655,600       37.0
                                                 ============================================================




                                                                     Three months ended
                                                                         September 30
                                                       1999                                  1998
                                                 ------------------------------------------------------------
                                                      Amount         Percent        Amount         Percent
                                                 ------------------------------------------------------------

Statutory federal income tax rate                  $     347,200        34.0    $    191,400        34.0
State taxes, net of federal benefit                       45,900         4.5          25,200         4.5
Permanently reinvested foreign income                    (68,000)       (6.7)             -          0.0
Change in valuation allowance relating
 to losses of foreign subsidiaries                        84,200         8.2          14,800         2.6
Other                                                    (20,400)       (2.1)         15,000         2.7
                                                 ------------------------------------------------------------
                                                   $     388,900        37.9    $    246,400        43.8
                                                 ============================================================


</TABLE>

Deferred  income  taxes  were not  provided  on  certain  undistributed  foreign
earnings of TBL  (cumulatively  $1,000,000  at September  30, 1999) because such
undistributed  earnings are expected to be reinvested  indefinitely overseas. If
these amounts were not considered  permanently  reinvested,  additional deferred
taxes of approximately $340,000 would have been provided.

                                        10

<PAGE>
NOTE G - Earnings Per Share

On July 15, 1999, the Board of Directors  approved a  five-for-four  stock split
(with no change in par  value) of both the  Company's  Class A Common  Stock and
Class B Common Stock.  The split was payable to  stockholders  of record on July
30,  1999.  All per share and  shares  outstanding  data have been  restated  to
reflect the impact of the split.


<TABLE>
<S>                                     <C>               <C>             <C>             <C>

The following table sets forth the computation of basic and diluted earnings per share:

                                                Nine months ended               Three months ended
                                                  September 30                    September 30
                                              1999            1998             1999             1998
                                          -----------------------------   -------------------------------
Numerator:
  Net Income- numerator
  for basic and dilutive earnings
  per share (income available
  to shareholders)                          $  1,838,700   $ 1,117,800        $632,200      $ 316,500

Denominator:
  Denominator for basic earnings
  per share - weighted
  average shares                               5,521,330     5,139,856       5,606,080      5,199,968

Effect of dilutive securities:

Stock options                                   322,735        169,259         356,130        248,785
                                          -------------  --------------   --------------   --------------

  Denominator for diluted
  earnings per share - adjusted
  weighted-average shares
  and assumed conversions                     5,844,065      5,309,115       5,962,210      5,448,753
                                          =============  ==============   ==============   ==============

Basic earnings per share                    $      0.33   $       0.22     $      0.11      $    0.06
                                          =============  ==============   ==============   ==============

Diluted earnings per share                  $      0.31   $       0.21     $      0.11      $    0.06
                                          =============  ==============   ==============   ==============

</TABLE>

NOTE H - Commitments

TASS  entered  into an office  lease  guaranteed  by Tremont  Advisers,  Inc. in
September  1999.  It  expires  in June 2005 but TASS may renew the lease for two
additional five-year periods. The monthly rent is approximately $14,000.


                                   11

<PAGE>


NOTE I - Contingencies

The Company is being sued by a former  employee  for alleged  breach of contract
and defamation.  In a decision dated September 21, 1999, the District Court held
that the claim for defamation must be arbitrated under NASD rules. Plaintiff has
not  commenced  arbitration  proceedings.  By Notice of Motion dated October 18,
1999,  the Company moved to dismiss the  complaint in its entirety.  The Company
believes that the suit is without merit; however,  should the plaintiff prevail,
the Company  believes that it is likely that the damages will not be material to
the Company's consolidated financial condition or results of operations.

NOTE J - Segment and Geographic Data

The Company  operates  principally  in a single  segment.  It  provides  various
alternative  investment  services  using a single and  multi-manager  investment
approach to placing  investment  funds with  independent  asset  managers.  This
segment  consists of one operating  unit that provides  services to two types of
clients:  the  Company's  proprietary  investment  funds  sponsored  by  certain
subsidiaries  and to  non-affiliated  investment  fund  sponsors,  institutional
investors and high net-worth individual investors.

For  the  proprietary   investment  funds   (typically   structured  as  limited
partnerships),   the  Company  serves  as  the  general  or  co-general  partner
participating  in  organizing  the  funds,   selecting  the  asset  classes  for
investment and providing the day-to-day  management and  administration  for the
operation of the funds, but does not make direct investment decisions.

For the  non-affiliated  investment fund sponsors,  institutional  investors and
high  net-worth   investors,   the  Company  provides  the  following  services:
consulting  regarding the  organization  of funds,  establishment  of investment
objectives and guidelines,  definition of suitable asset classes, negotiation of
fees with asset  managers and other  professionals,  monitoring  the  investment
performance information data services and providing periodic reports.

The following  table provides a summary of the types of fees earned with respect
to each of the two primary client types discussed above.


                                        12

<PAGE>

<TABLE>
<S>                                     <C>            <C>               <C>              <C>

                                              Nine months ended               Three months ended
                                                September 30                      September 30
                                            1999            1998              1999          1998
                                       -------------------------------   ----------------------------
                                                (Unaudited)                       (Unaudited)
Revenues

Proprietary investment funds
  Asset-based fees                       $  5,773,000   $ 3,412,800      $     2,108,400   $ 1,394,900
                                       --------------  ---------------   --------------   -------------
Total revenue from proprietary
  investment funds                          5,773,000     3,412,800            2,108,400     1,394,900

Consulting clients
  Asset-based fees                          2,935,000     2,706,300            1,055,700       940,400
  Performance-based fees                      190,800       324,400               60,000         7,800
  Annual retainer and special project fees    911,700       711,300              287,500       278,200
  Administration fees                         274,000       152,500               92,500        33,300
  Information data services                 1,046,800            -               398,700            -
                                       --------------  ---------------   --------------  -------------
                                            5,358,300     3,894,500            1,894,400     1,259,700

Other revenue (1)                             296,400       316,200               49,300        98,000
                                       --------------  ---------------   --------------  -------------

Total revenues                           $ 11,427,700    $7,623,500         $  4,052,100   $ 2,752,600
                                       ==============  ===============   ==============  =============

(1) Other revenue consists of commissions earned through TSI (the Company's wholly-owned introducing
     broker/dealer).

</TABLE>

                                   13

<PAGE>

<TABLE>
<S>                                     <C>                   <C>             <C>            <C>
                                                  Revenues (a)                            Revenues (a)
                                                  Nine months ended                Three months ended
                                                     September 30                     September 30
                                               1999               1998          1999             1998
                                        -------------------------------------------------------------------
                                                        (Unaudited)                     (Unaudited)
United States                                 $  6,946,000       $5,091,200    $ 2,449,800     $  1,850,400
Bermuda                                          3,434,900        2,532,300      1,203,600          902,200
Canada                                                  -                -              -                -
United Kingdom                                   1,046,800               -         398,700               -
                                        -------------------  -----------------------------  ---------------
Total Revenues                                 $11,427,700       $7,623,500    $ 4,052,100     $  2,752,600
                                        ===================  =============================  ===============

(a) Revenues attributed to countries based on the location of the subsidiary performing the services.

Substantially all long-lived assets are located in the United States.

</TABLE>

During the periods  presented  in the  consolidated  statements  of income,  two
clients  accounted  for a significant  percentage of the Company's  consolidated
revenues.  For the nine and three  months  ended  September  30,  1999 and 1998,
American  Masters  Broad Market Fund,  L.P.  accounted for  approximately  13.6%
versus 13.7% and 14.8% versus 14.6%, respectively,  of consolidated revenues. In
addition,  for the nine and three  months  ended  September  30,  1999 and 1998,
American Masters Broad Market Prime Fund, L.P. accounted for approximately 17.6%
versus 18.0% and 15.4% versus 18.4%, respectively, of consolidated revenues.


                                   14

<PAGE>

Item 2.     Management's Discussion and Analysis

The Company's  revenues are derived from consulting and  specialized  investment
services provided to institutional and other clients, as well as management fees
from certain funds under management. Consulting fees are generally a function of
the  amount of assets  under  management  and the  percentage  fees  charged  to
clients.  Management fees are based on a percentage of the assets of the managed
fund and are usually  paid on a monthly or  quarterly  basis.  The Company  also
receives  asset-based  fees for investments  placed by its  subsidiary,  Tremont
(Bermuda)  Limited  ("TBL"),  in certain  offshore  mutual  funds.  The  Company
provides other consulting  services  generally on a fixed fee basis,  whether as
annual  retainer  fees  or  single  project  fees.  With  the  purchase  of TASS
Investment  Research  Limited  ("TASS") on March 11, 1999,  the Company also has
revenues  from  the  sale of  electronic  database  information.  The  Company's
principal  operating  expenses consist of its costs of personnel and independent
consultants.  It is  management's  intention to continue the Company's  focus on
launching  new  products  and  to  take  advantage  of  its  growing  world-wide
relationships to expand its operations.

Consulting fees earned for the nine months ended September 30, 1999 increased by
$3,957,600,  or 56.7%,  from  $6,982,900 for the nine months ended September 30,
1998 to  $10,940,500  for the nine  months  ended  September  30,  1999.  At the
Company's  principal  domestic  subsidiary,   Tremont  Partners,  Inc.  ("TPI"),
consulting  fees increased from  $4,665,600 for the nine months ended  September
30, 1998 to  $6,481,300  for the nine months  ended  September  30,  1999.  This
increase was primarily  due to increases in revenues  resulting  from  increased
assets under  management in the following  related  entities:  American  Masters
Broad Market Prime Fund, L.P. ($840,900 increase), American Masters Broad Market
Fund, L.P.  ($426,700  increase) and the  DaimlerChrysler  Minority Equity Trust
($269,100  increase).  At TBL, consulting fees increased from $2,245,700 for the
nine months ended  September  30, 1998 to  $3,304,100  for the nine months ended
September  30, 1999.  This increase was primarily due to an increase in revenues
as a result of increased  assets under management from Kingate Global Fund Class
B Shares  ($883,500  increase)  and  within  the  investment  vehicles  of other
clients.  Additionally,  $1,046,800  of the  increase  was from  TASS's  sale of
electronic  database  information.  The placement agent fees received by Tremont
Securities,  Inc. ("TSI"), the Company's wholly-owned  broker-dealer subsidiary,
increased  from $71,500 for the nine months ended  September 30, 1998 to $97,300
for the nine  months  ended  September  30,  1999.  The  remaining  increase  in
consulting  fees was from Tremont  Futures,  Inc.  ($10,900  increase) which was
formed in July, 1998.

Consulting  fees for the Company for the three months ended  September  30, 1999
increased by $1,296,000,  or approximately 49.0 %, from $2,646,800 for the three
months  ended  September  30,  1998 to  $3,942,800  for the three  months  ended
September  30, 1999.  The  increase was due to increases in the assets  managed,
increases in the value of the assets within the respective  investment  vehicles
and a larger client base.  TPI's  consulting  fees increased from $1,733,000 for
the three months ended  September 30, 1998 to  approximately  $2,304,400 for the
three  months  ended  September  30,  1999.  The  increase is  primarily  due to
increases in revenues  from  American  Masters  Broad  Market  Prime Fund,  L.P.
($233,600  increase),   American  Masters  Broad  Market  Fund,  L.P.  ($153,700
increase) and the  DaimlerChrysler  Minority  Equity Trust  ($90,400  increase).
TBL's  consulting  fees  increased  from  $894,500  for the three  months  ended
September 30, 1998 to $1,203,500 for the three months ended  September 30, 1999.
The increase is  attributable  to increased  revenues  from Kingate  Global Fund
Class B Shares  ($235,200  increase),  and American Masters LDC (formerly called
Tremont  Broad Market Fund,  LDC)  ($98,500  increase),  offset by a decrease in
revenues from Starvest Funds, Ltd. ($44,900 decrease). Additionally, $398,700 of
the increase was from TASS' sale of electronic database information,  as well as
an increase in placement  agent fees received by TSI ($11,700  increase) for the
three months ended September 30, 1999. The remaining increase in consulting fees
is from Tremont Futures, Inc. ($5,200 increase).

                                   15

<PAGE>

Performance  fees for the nine months  ended  September  30, 1999  decreased  by
$133,600,  or 41.2%,  as compared to the nine months  ended  September  30, 1998
primarily because certain clients' underlying investment vehicles did not obtain
and/or outperform certain pre-established  benchmarks.  For example, a client of
TBL's paid an incentive  fee of $242,000 in April 1998;  such  incentive fee did
not recur for the year ended  December 31, 1998.  Performance  fees increased by
$52,200 from $7,800 for the three months ended September 30, 1998 to $60,000 for
the three months  ended  September  30,  1999,  primarily as a result of certain
clients'  underlying  investment vehicles  outperforming  their  pre-established
benchmarks.

Commissions  received by TSI  decreased by $19,800,  or 6.3%,  and  $48,700,  or
50.0%,  respectively,  for the nine and three  months ended  September  30, 1999
compared to the similar periods in 1998, primarily as a result of the commission
flow  being  more  extensive  in 1998  than in 1999.  In  addition,  commissions
decreased  in 1999 as a result of a different  mix of money  managers  executing
trades through TSI.

Management  expects  that during the  remainder  of 1999 that the  Company  will
continue to develop  relationships  with additional  potential  clients and will
utilize these relationships to create diversified ways to package and distribute
its  proprietary  products.  For instance,  the Company has entered into a joint
venture agreement with Credit Suisse First Boston to form a series of benchmarks
for the hedge fund industry and to start a line of investable  indexed products.
The joint venture is called  Credit  Suisse First Boston  Tremont Index LLC. The
CSFB Tremont Hedge Fund Index, a  capital-weighted  master index, is anticipated
to be  launched  during the  fourth  quarter  of 1999,  followed  by a series of
capital weighted sub-indicies based on various investment strategies and styles.
It is also  anticipated  that the joint  venture  will launch  investable  index
products during 2000. In addition, management expects performance fee revenue to
increase during periods of positive  market  conditions,  but management  cannot
predict  with any  accuracy  whether  such  income  from  performance  fees will
continue in the future due to changing market conditions and outside factors.

Compensation expense increased for the nine and three months ended September 30,
1999 by $1,792,400,  or 64.4%, and $840,000, or 84.8%,  respectively as compared
to the nine and three months ended September 30, 1998.  These  increases  result
from the Company's  acquisition of TASS on March 11, 1999,  salary increases for
certain  employees that became  effective  January 1, 1999, the increased health
care costs arising from the increased  number of employees  from 31 at September
30, 1998 to 51 at September  30, 1999,  increased  bonus  accruals of on average
$45,000  per month;  and a charge of  $402,100  in August  1999  relating to the
distribution of 120,500 shares of Fitx Group Limited stock to certain  employees
and directors of the Company.

General   and    administrative    expenses    consist    primarily   of   rent,
telecommunications,  travel  and  entertainment,  professional  fees  and  other
related  expenses.  General and  administrative  expenses for the nine and three
months ended September 30, 1999 increased by $850,900,  or 44.9%,  and $299,700,
or 40.5%,  respectively as compared to the nine and three months ended September
30, 1998. This increase was primarily due to the acquisition of TASS,  increased
professional  fees  associated  with  the  Payroll  Express  Company  bankruptcy
investigation and costs related to the Company's continued expansion,  including
the  expansion  of its  office  space in  September  1998 and the  opening  of a
Canadian subsidiary and office in July, 1998.

Consulting  expenses  increased  $167,000,  or  16.8%,  and  $42,100,  or 12.6%,
respectively  for the nine and three months ended September 30, 1999 as compared
to the nine and three months ended September 30, 1998,  primarily as a result of
the increase in revenues from the clients that  participate  in revenue  sharing
arrangements.  For example,  TSI has a clearing  arrangement  with Bear Stearns,
Inc. whereby 25% of the commissions are shared with Bear Stearns, Inc. Also, TPI
and TBL have revenue  sharing  arrangements  with various clients whereby earned
management fees are split with third party solicitors.

                                   16

<PAGE>

Amortization of intangibles  increased  approximately  $609,800 and $202,600 for
the nine and three months ended  September  30, 1999 as compared to the nine and
three months ended September 30, 1998,  because of the TASS acquisition on March
11, 1999.

Equity earnings from limited  partnerships  increased  $216,000,  or 193.5%, and
$141,900, or 355.6%,  respectively for the nine and three months ended September
30, 1999 as compared to the nine and three months ended September 30, 1998, as a
result of  increased  performance  and a  greater  asset  base due to  increased
investments by the Company.  During 1999, the Company invested $500,000 into the
Tremont  Masters Fund when it was launched on February 1, 1999 by the  Company's
Canadian  subsidiary,  Tremont  Investment  Management,  Inc. In  addition,  the
Company  invested  $417,900  through TPI, into the American Masters Broad Market
Prime Fund, L.P.

Equity  earnings  from other  investments  increased  $563,500,  or 279.6%,  and
$431,400,  or 649.7%,  for the nine and three months ended September 30, 1999 as
compared  to the nine and  three  months  ended  September  30,  1998.  This was
primarily as a result of increased  performance  and a greater asset base due to
increased  investments  by the Company.  During 1999,  TBL invested  $600,000 in
American Masters LDC, (formerly called Tremont Broad Market Fund, LDC), a Cayman
Island corporation organized for the purpose of achieving capital growth through
hedged investments.  TBL also invested $209,100 in Fitx Group Limited, a Bermuda
Company formed on June 23, 1999. The Company also  recognized a gain of $402,100
due to the distribution of 120,500 shares of Fitx Group Limited stock to certain
employees  and  directors  of  the  Company.  In  addition,  the  Company  owned
twenty-five  percent of a joint venture operation which suffered a $200,000 loss
in 1998. The Company closed this joint venture effective December 31, 1998.

Profitability is dependent on the Company's  ability to maintain existing client
relationships,  several of which currently account for a significant  portion of
the Company's revenues, to increase assets under management for its clients, and
to market its services to new accounts.

On March 11, 1999, the Company acquired all of the outstanding ordinary (common)
shares of TASS, a London,  England  based  company  specializing  in the sale of
electronic  database  information.  The Company issued  238,096 shares  (190,477
shares pre-split) of its Class B Common Stock at $6.00 per share in exchange for
the TASS common shares,  of which 80,212 shares (64,170 shares  pre-split)  were
received by Nicola Meaden,  the founder and chief executive officer of TASS. The
transaction   was  accounted  for  using  the  purchase  method  of  accounting.
Accordingly,  the  excess  of cost  over the  fair  market  value of net  assets
acquired  (approximately  $2.2  million) is being  amortized on a straight  line
basis over a ten year period.  The  operations of TASS have been included in the
consolidated statement of operations from the date of closing. Revenues included
for the period from acquisition  through  September 30, 1999 were $1,046,800 and
expenses totaled  $1,346,000,  resulting in a loss before taxes of $299,200.  In
connection with the  acquisition,  employment  agreements were entered into with
two key employees of TASS,  including Ms. Meaden,  who were also granted options
to  purchase   shares  of  the  Company's  Class  B  Common  Stock  and  certain
registration rights.

Cash provided by operations increased by $1,373,500 from $1,187,000 for the nine
months  ended  September  30,  1998 to  $2,560,500  for the  nine  months  ended
September 30, 1999.  This  increase was primarily due to profitable  operations,
decreases in prepaid expenses and other assets, and increased taxes payable, and
partially  offset by increases in accounts  receivable and decreases in accounts
payable,  net of liabilities  acquired in the TASS  acquisition.  These positive
changes in cash flow, as well as the issuance's of Common Stock ($477,700), were
substantially  offset by investing  activities of $2,168,600,  resulting in cash
and cash equivalents  increasing by $869,600 for the nine months ended September
30, 1999.


                              17

<PAGE>

On July 15, 1999,  the  Company's  Board of Directors  approved a  five-for-four
stock split (with no change in par value) of both its outstanding Class A Common
Stock and its Class B Common Stock,  which was paid to stockholders of record on
July 30, 1999. All per share and shares  outstanding  data have been restated to
reflect the impact of the split.

On July 1, 1999, the Company  exercised  options to purchase  80,000 shares of a
nonpublic  registered  investment  advisor  specializing  in  401(k)  investment
allocation  advice  over the  internet.  The options  were  granted at $1.00 per
share,  as adjusted for a stock split. At September 30, 1999, the investment was
valued at $80,000 by the Company and is included in other investments.

At September  30,  1999,  the Company  owned 30,000  shares of common stock of a
non-public  financial services company.  The shares were received by the Company
as a result of an  employee's  serving  as a board  member of such  company.  At
September  30,  1999,  the  shares of common  stock  were  valued at zero by the
Company.

The Company  believes it has adequate  capital  resources and working capital to
bring to market those products  currently in the  developmental  stage, and that
the revenue  stream  from them and  existing  products,  will be  sufficient  to
support future growth.  The Company has no material short term or long term debt
obligations.

TASS  entered  into an office  lease  guaranteed  by Tremont  Advisers,  Inc. in
September  1999. It expires in June 2005 but the Company may renew the lease for
two additional five-year periods. The monthly rent is approximately $14,000.

The Company is being sued by a former  employee  for alleged  breach of contract
and defamation.  In a decision dated September 21, 1999, the District Court held
that the claim for defamation must be arbitrated under NASD rules. Plaintiff has
not  commenced  arbitration  proceedings.  By Notice of Motion dated October 18,
1999,  the Company moved to dismiss the  complaint in its entirety.  The Company
believes that the suit is without merit; however,  should the plaintiff prevail,
the Company  believes that it is likely that the damages will not be material to
the Company's consolidated financial condition or results of operations.

The Year 2000 Issue is a result of computer  programs  being  written  using two
digits rather than four to determine the applicable year. Any computer  programs
that have time  sensitive  software or embedded chips may recognize a date using
"00" as the year 1900 rather than the year 2000.  This could  result in a system
failure  or  miscalculations  causing  significant  disruptions  of  operations,
including,  among other things, a temporary inability to process transactions or
engage in similar normal business activities.

Based on recent assessments,  the Company determined that it will be required to
modify or replace certain  portions of its software and certain hardware so that
those systems will properly  utilize dates beyond December 31, 1999. The Company
presently  believes that with  modifications or replacements of certain existing
software and certain hardware, the Year 2000 Issue can be mitigated. However, if
such  modifications  and replacements are not made, or are not completed timely,
the Year 2000  Issue  could  have a  material  impact on the  operations  of the
Company.

The Company's  plan to resolve the Year 2000 Issue  involves the following  four
phases:  assessment,  remediation,  testing,  and  implementation.  To date, the
Company  has  fully  completed  its  assessment  of all  systems  that  could be
significantly affected by the Year 2000. The completed assessment indicated that
certain of the Company's  significant  information  technology  systems could be
affected,   particularly  the  network  computing  platform's  operating  system
software,  certain spreadsheet  applications and the Company's proprietary Hedge
Fund Research database software.


                                   18

<PAGE>

To date, the Company has completed  approximately  90% of the remediation  phase
for its information  technology and expects to complete  software  reprogramming
and  replacement no later than December 15, 1999.  Once software is reprogrammed
or replaced for a system, the Company begins testing and  implementation.  These
phases  run  concurrently  for  different  systems.  To date,  the  Company  has
completed  approximately 90% of its testing and has implemented more than 90% of
its  remediated  systems.  Completion of the testing  phase for all  significant
systems is expected to be completed by December 15, 1999.

In the event that the Company  does not complete  any  additional  phases of the
remediation  process, the Company would be able to provide the minimum necessary
level of alternative  investment research information,  which is critical to its
consulting  services,  and it would be able to process the  relevant  accounting
transactions manually.

The Company has queried its important  suppliers and subcontractors  that do not
share  information  systems with the Company  (external  agents) about Year 2000
compliance  and continues to monitor their  compliance.  To date, the Company is
not aware of any external agent Year 2000 Issue that would materially impact the
Company's results of operations,  liquidity, or capital resources.  However, the
Company has no means of ensuring that  external  agents will be Year 2000 ready.
The inability of external agents to complete their Year 2000 resolution  process
in a timely fashion could have a material  impact on the Company.  The effect of
non-compliance by external agents is not determinable.

In  addition,  disruptions  in the economy  generally  resulting  from Year 2000
Issues  could also  materially  adversely  affect the  Company.  In  particular,
unexpected  volatilities  within the investment  industry could adversely impact
the Company's  revenues,  as a significant  portion of the Company's revenues is
based solely upon the net asset value of funds under  management.  The amount of
potential lost revenue cannot be reasonably estimated at this time.

The Company is utilizing  both  internal and  external  resources to  reprogram,
replace,  test and implement the software and operating  equipment for Year 2000
modifications.  The total cost of the Year 2000 project is estimated at $550,000
and is being  funded  through  operating  cash flows.  To date,  the Company has
incurred  approximately  $315,000,  which is capitalized for the new systems and
equipment. Of the total remaining project costs,  approximately $100,000 will be
attributable  to the purchase of new software and  hardware,  which will also be
capitalized.  The remaining  $135,000 relates to consulting fees which are being
expensed as incurred.

Management  believes  it has an  effective  program in place to resolve the Year
2000 issue in a timely manner. As noted above, the Company has not completed all
necessary  phases of its Year 2000  program,  but expects to be completed in the
fourth quarter of 1999. The Company has contingency  plans for certain  critical
applications and is working on such plans for others.  These  contingency  plans
involve,   among  other  things,   manual  workarounds  and  adjusting  staffing
strategies.

Certain  statements  in this  Management's  Discussion  and Analysis  constitute
"forward  looking  statements"  within  the  meaning of the  Private  Securities
Litigation Reform Act of 1995. Such forward looking statements involve known and
unknown  risks,  uncertainties  and other  factors  which  may cause the  actual
results,  performance, or achievements of the Company to be materially different
from any future results,  performance,  or achievements  expressed or implied by
such forward looking statements.  These forward looking statements were based on
various factors and were derived utilizing  numerous  important  assumptions and
other factors that could cause actual results to differ materially from those in
the forward looking statements, including, but not limited to: uncertainty as to
the Company's  future  profitability  and the  Company's  ability to develop and
implement   operational   and  financial   systems  to  manage  rapidly  growing
operations,  competition in the Company's existing and potential future lines of
business,  and other factors. Other factors and assumptions not identified above


                                        19

<PAGE>

were also involved in the derivation of these forward  looking  statements,  and
the failure of such other assumptions to be realized,  as well as other factors,
may also cause actual results to differ  materially  from those  projected.  The
Company  assumes no  obligation to update these  forward  looking  statements to
reflect  actual  results,  changes in  assumptions  or changes in other  factors
affecting such forward looking statements.

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<PAGE>

                           PART II - OTHER INFORMATION

Item 1.  Legal Proceedings

Payroll  Express.  In 1991, the Company engaged KPM, Inc. d/b/a/ Payroll Express
("Payroll  Express") to perform  certain  data  processing  services,  including
preparing  Forms 941 and filing them with the Internal  Revenue  Service ("IRS")
and  paying  payroll  and  other  taxes on behalf of the  Company.  The  Company
terminated  its  relationship  with Payroll  Express upon being  informed by the
Chapter 11 Trustee for Payroll Express that the Company had suffered a potential
loss as a result of a fraudulent  scheme  undertaken by Payroll  Express and its
principal, David S. Kast. It appears that Payroll Express failed to make certain
payments  to the  IRS on the  Company's  behalf  and  falsely  and  fraudulently
misrepresented  to the Company the dollar  amount of taxes  actually paid to the
IRS. It also appears that a  substantial  portion of these funds  (approximately
$400,000) was wrongfully  appropriated  by Payroll  Express and Kast. This theft
created an  additional  federal tax  liability  for the Company in the amount of
$307,500  for the years  1995 and 1996  which has been  paid.  These sums do not
include  interest or  penalties  since the Company has been  informed by the IRS
that,  based upon its initial review of this matter,  interest and penalties may
not be assessed.

The Company  has been  reimbursed  by its  insurance  carrier for a  substantial
portion of the above federal tax liability. The Company is also cooperating with
the authorities in their ongoing  criminal  investigation of Payroll Express and
Kast,  and  has  filed  a Proof  of  Claim  in the  Payroll  Express  bankruptcy
proceeding.

Vasu.  The  Company is being sued by a former  employee  for  alleged  breach of
contract and  defamation.  In a decision dated  September 21, 1999, the District
Court held that the claim for  defamation  must be arbitrated  under NASD rules.
Plaintiff has not commenced arbitration  proceedings.  By Notice of Motion dated
October 18, 1999,  the Company  moved to dismiss the  complaint in its entirety.
The  Company  believes  that the suit is  without  merit;  however,  should  the
plaintiff prevail,  the Company believes that it is likely that the damages will
not be material to the Company's  consolidated financial condition or results of
operations.

Item 6.           Exhibits and Reports on Form 8-K

There were no reports on Form 8-K filed during the quarter  ended  September 30,
1999.

Signature

Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
Registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.


                                            Tremont Advisers, Inc.


Date:  November 12, 1999                    /s/ Stephen T. Clayton
                                            Stephen T. Clayton
                                            Chief Financial Officer
                                            (Duly authorized Officer and
                                            Principal Financial and Accounting
                                            Officer)



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